Members of Circle Protection, a Washington, D.C.-based Christian coalition, participate in a “faithful filibuster’”outside of the Capitol on Wednesday.

A potentially crippling U.S. debt default was averted late Wednesday, as Congress passed legislation to end a political showdown that had rattled financial markets, splintered the Republican Party and showcased Washington dysfunction.

The Senate was scheduled to convene at noon Wednesday, but details of a plan could be announced before then, as aides to the chamber’s Democratic and Republican leaders said lawmakers were close to reaching a final deal Tuesday night.

Another big question, of course, is how the deal will be received in the Republican-led House, where the GOP’s most combative conservatives have stymied efforts by Speaker John Boehner to move legislation.

What’s in the Senate deal? The deal would fund federal agencies through Jan. 15 and extend the nation’s borrowing authority through Feb. 7. The agreement includes no major alterations to the 2010 health-care law, known as Obamacare. But the deal will include one minor change sought by Republicans, setting new procedures to verify the incomes of some people receiving government subsidies for health-insurance costs.

As Patrick O’Connor reported, all eyes are on House Republicans and what they might be willing to pass. By rejecting the latest proposal from GOP leaders on Tuesday, right on the cusp of a critical deadline, the House may soon be forced to vote on a deal hatched by Senate leaders.

Mark Zandi, chief economist at Moody’s Analytics, tells a breakfast sponsored by the Third Way think tank in Washington that the danger to the U.S. economy won’t be over until 1) Congress stops appearing so frequently on the front pages of the New York Times and The Wall Street Journal, and 2) so many of the newspapers’ journalists stop turning up at his breakfasts. Mr. Zandi also warns of a 2008-type market meltdown in late Oct. if the impasse isn’t fixed, as investors realize that someone – most likely Social Security recipients—won’t be paid when bills come due on Nov. 1.

Back to the House:The House budget fight has amplified a long-standing rift between conservatives willing to upend traditional ways of doing business to slow the growth of federal spending and dismantle the 2010 health law, and other, more-veteran lawmakers who see these actions as damaging to the party. Speaker Boehner has indicated he will bring to the floor whatever plan the Senate passes, even though it will have almost none of the policy goals conservatives have been demanding. Mr. Boehner is sure to need Democratic votes to approve the Senate measure, an awkward position for the chamber’s Republican leader.

This morning on NPR, Sen. Saxby Chambliss (R., Ga.) said, “I think folks on both sides of the aisle are ready to get this done.” In the House, Chambliss says he thinks Speaker Boehner will need a lot of Democratic votes to pass a bill. On Sens. Lee and Cruz not attending a GOP lunch Tuesday: “Mike and Ted were not at the GOP lunch but I don’t think that’s an indication of any issue,” and he said they realize their anti-Obamacare push is done.

Warren Buffett on the debt ceiling fight, speaking on CNN: “It’s insanity, but I do think it will get resolved…. It is totally asinine to have a debt ceiling at all…. It’s a political weapon of mass destruction that shouldn’t be used…. It should never be used again. … Why worry the world, why worry the American people.”

Rep. Kevin Brady (R., Texas) tells Bloomberg TV that he believes the Senate agreement will pass the House, according to a writeup of the interview released by Bloomberg. He added: “I have not talked to the speaker. He has made it clear that if an agreement is made in the Senate, it will come to vote in a very timely way. I don’t know that the decision would be made that the House would lead on a Senate Republican and Democrat agreement.” On the tea party wing’s reaction to the bill, he said: “I would imagine that they don’t like it or support it. Clearly, Affordable Care Act was a high priority going into this.”

On Wall Street, the Dow Jones Industrial Average rose 185 points, or 1.2%, to 15351 in recent trade, climbing to session highs hopes that House Republicans are willing to approve a debt-limit deal. “The markets feel we are closer to a deal as we get closer to a [debt limit] deadline,” said Joseph Quinlan, chief market strategist at U.S. Trust, Bank of America Private Wealth Management. “But the green this morning could be red this afternoon.

Will Ted Cruz try to delay the Senate measure? Says fellow Senate Republican Kelly Ayotte of N.H.: “I would hope that he wouldn’t. I mean, in the Senate obviously in terms of certain time frames, senators can cause to you run out the clock, but what’s he trying to gain at this point?” Ms. Ayotte made the comments on CNN’s “New Day.

How fast could Congress pass a deal to avoid a U.S. debt default? With Senate leaders close to settling on a deal this morning, attention turns to whether any lawmaker (paging Ted Cruz!) will make use of Senate rules that allow a single senator to slow down legislation. Here’s one thing that could speed up the process: The House could vote on the Senate’s own plan first, even before the Senate does. House leaders were contemplating such a move on Wednesday morning. Read the full item.

What’s Next? The Senate convenes at noon, but we could hear of a deal before then. Confusing matters, the House, which convenes at noon for legislative business, could vote before the Senate. Stay tuned.

In another piece of this puzzle, we are now reporting that Senate negotiators have agreed not to prevent the Treasury Department from using emergency measures to avoid default in the future, congressional aides said, a big win for the White House that will have implications the next time Congress debates whether to raise the country’s borrowing limit. Earlier this week, President Barack Obama, in a phone call with Senate Minority Leader Mitch McConnell (R,. Ky.), had pressed for these powers to be preserved.

Markets are in a holding pattern, waiting to see what happens in Washington. The Dow Jones Industrial Average is up about 175 points, or 1.2%, and was up more than 200 points earlier. The three major stock indexes are all up more than 1%.

Despite the confusion over exactly what’s going to happen today, the market’s stance is clear: it expects a deal. Crude oil futures are up about 0.5%, and gold is down about 0.2%, which is what you’d expect from those two markets assuming a deal is imminent.

The yield on the U.S. 10-year Treasury note is at 2.73%. It had gone up to 2.76% earlier. The yield on the three-month Treasury bill is down to 0.10%; it was at 0.14% earlier.

Meanwhile, the market for very short-term Treasury debt, or T-bills, continues to flash alarm over the possibility of a U.S. default. The yield on the T-bill due Oct. 24 soared to a fresh multi-year high of 0.722% Wednesday while the T-bill due Oct. 31 hit as high as 0.685%, according to Tradeweb. Bond prices fall when their yields rise. In recent trade, the selling pulled back as U.S. stocks rallied. The yield on the T-bill due Oct. 24 traded at 0.312% and the T-bill due Oct. 31 yielded 0.4%.

In his own comments after Reid, Republican leader Mitch McConnell plays up budget-control act, calling it biggest sepnding reduction bill of last quarter century. Also takes shot at Obamacare, says problems with rollout is sign of things to come.

In comments, Sen. John McCain calls the prolonged crisis shamful, but credits group of 14 bipartisan senators for fixing the problem. In particular, commends role of women colleagues in the Senate for progress.

Some more details on the Senate deal: The Senate agreement also includes no major alterations to the 2010 health-care law. But the deal will include one minor change sought by Republicans, setting new procedures to verify the incomes of some people receiving government subsidies for health-insurance costs. Negotiators rejected a Democratic proposal to delay for one year a fee of $63 per insured person levied on groups that offer health policies, including employers, labor unions and insurance carriers—a fee opposed by many large employers and unions. (Above: Reid entering the Capitol on Wednesday.)

Gold ticks higher as Senate leaders unveil a proposal to temporarily raise the U.S. borrowing limit and reopen the federal government. Wait, why? Archer Financial’s Adam Klopfenstein explains: “Gold is something investors are scared to sell in case there’s a last minute hiccup.” As the stakes for a budget and debt ceiling compromise rise, so does the desire to protect their wealth against last minute disruptions, he says. Comex Dec gold recently up $5.50, or 0.4%, at $1,278.70/troy oz.

Meanwhile, there was palpable relief among Republicans who had been part of a bipartisan effort to break the deadlock. “We’re ready to open the government and we are ready to make sure everyone around the world knows the U.S. pays its bills on time,’’ said Sen. Lamar Alexander (R., Tenn.).

“The president believes that the bipartisan agreement…will reopen the government and remove the threat of economic brinkmanship that has already harmed” the economy. “The president applauds” Reid and McConnell and “encourages Congress to act swiftly.”

Asked, when can they pass this, can they get it done tonight? “As soon as possible is essentially the recommendation we have from here.”

Sen. Kelly Ayotte (R.N.H.), a centrist involved in the bipartisan Senate effort, bridled at suggestions that conservatives were prepared to re-fight the anti-Obamacare battle when the next budget deadline comes. “”If we learn nothing else, I hope we learn we shouldn’t get behind a strategy that has no endgame.

CEOs generally not impressed with Congress these past few weeks. Ron DeFeo, chief executive of Terex Corp., a maker of cranes and other construction and port equipment, was on a business trip in China Wednesday but emailed this terse advice for Congress: “Deal with reality, compromise, and focus on growth initiatives and entitlement reform.”

Stocks held gains after Senate leaders announced a deal that would temporarily raise the nation’s debt ceiling and fully reopen the government. The Dow Jones Industrial Average rose 176 points, or 1.2%, to 15344 in afternoon trading. The S&P 500 index gained 20 points, or 1.2%, to 1718. The Nasdaq Composite Index advanced 43 points, or 1.1%, to 3837.

Treasury notes and bonds also joined the relief rally as buyers took advantage of earlier selling to buy with default risk diminishing. The price of the 10-year note rose 5/32 to yield 2.702%.

November crude-oil futures ticked up 1.2% to $102.07 a barrel, after falling to more than a three-month low on Tuesday. October gold futures rose 0.6% to $1,280 a troy ounce.

The White House Wednesday provided a little more clarity about when the Treasury will run out of its ability to borrow money. White House press secretary Jay Carney said that moment will come “at the end of the day” Thursday. The Treasury had previously said the “extraordinary measures” it deployed to keep below the debt ceiling would run out on Oct. 17, without clarifying whether that meant midnight Wednesday or the subsequent day. Beyond Thursday, “the Treasury would have only cash on hand. It would not be able to borrow new money to meet obligations,” Mr. Carney said

A debt deal reached, and the dollar is sinking. The greenback has given up most of its gains made early in the day: Against the euro, the dollar trades at $1.3535, from $1.3472 at its peak. It’s at Y98.77 against the yen, from Y98.14, and is also losing ground against the Australian dollar and British pound.

Alan Miller, CEO of hospital-management company Universal Health Services, is a donor to many Republicans, including Rep. Eric Cantor (R., Va.). He said he never expected Congress to allow a default and hadn’t created any contingency plans on borrowing or delayed Medicare payments in the event he was wrong. The Affordable Care Act, which has at times been at the heart of the government stand-off, is good for his business, he noted, since it will likely reduce patients’ unpaid medical debts.

More from Alan Miller of Universal Health Services: He said of the tea party, “I know they’re standing on principle and some of the things they’d like to get done make sense, like [reducing] the deficit, but you don’t do this [negotiate on the default] at the last minute. And I don’t know if it’s only their fault.” He added, “Neither side in Congress looks good. I don’t think the leadership looks good or the president.”

New Boehner statement: ”The House has fought with everything it has to convince the president of the United States to engage in bipartisan negotiations aimed at addressing our country’s debt and providing fairness for the American people under ObamaCare. That fight will continue. But blocking the bipartisan agreement reached today by the members of the Senate will not be a tactic for us.” Full text.

Stocks closed up The Dow Jones Industrial Average climbed 205.82points, or 1.4%, to 15373.83. The S&P 500 rose 23.48 points, or 1.4%, to 1721.54, off 0.23% from its record high of 1725.52 hit on Sept. 18. The Nasdaq Composite climbed 45.42 points, or 1.2%, to 3,839.43, a new 52-week high.

Standard & Poor’s Ratings Services estimated the U.S. federal government’s shutdown has shaved at least 0.6% off of the nation’s fourth-quarter gross domestic product, hurting the economy by $24 billion. “The bottom line is the government shutdown has hurt the U.S. economy,” S&P wrote in a report Wednesday. The ratings firm’s report came a day after peer Fitch Ratings placed the U.S.’s triple-A rating on watch for downgrade.

Meanwhile, federal agencies are crafting plans to recall hundreds of thousands of furloughed workers. Depending on the timing of a congressional agreement, agencies could be back up and running as early as Thursday afternoon, officials said. We’ll have more details shortly.

If a deal is reached Wednesday evening, museums, monuments and the National Mall will open 10 a.m. Thursday, said Linda St. Thomas, chief spokesperson for the Smithsonian Institution. The National Zoo won’t open until 10 a.m. Friday, but panda fans are in luck – the revered Panda cam will restart around midday Thursday.

Tea Party Express sends a note to members: “We are saddened to see today that the political establishment in Washington DC continues to do the only thing they seem to know – kick the proverbial can down the road. Instead of repealing, defunding or at least delaying the atrocious Obamacare, the political elites are content to let the ‘train wreck’ happen at the expense of the American people.”

OK, we’re going to shut down the live blog. The stream (which some of you are viewing this is) will continue running, with news stories, tweets and updates. We expect a House vote later tonight. Thanks for joining us.

Comments (5 of 19)

O’Bongo increased the national debt in one term more than Bush did in two wrote:

stupid or liar?

4:36 pm October 16, 2013

Charles Nesbit wrote:

Holding a Government to ransom is not a good negotiating tool Mr. Boehner. In fact it is simply not 'negotiating' and you're accusing the other side for not accepting your pressure tactics. Shame on you and your group of conservative twits. The deficit, which should of course be greatly reduced, was not caused by Mr. Obama as you well know. It's origins go back are are largely rooted in Republican administrations and their fruitless conflicts.

4:24 pm October 16, 2013

@10:27am wrote:

BBBEEENNNGGGHHHAAAZZZIII!!! Did you see any Acorn people rescuing anyone at Benghazi? No you didn't! Thus, Acorn caused Benghazi! AAACCCOOORRRNNN!!!

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